Purchase Requisition Approval: Definition

Glossary definition of purchase requisition approval, its role in AP workflow, and how it differs from contract compliance checks that catch margin drift.

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Purchase Requisition Approval: Definition

Purchase requisition approval is the internal sign-off step where a designated approver authorizes a request to buy goods or services before a purchase order is issued. It sits at the front of the procure-to-pay cycle, confirming that a purchase is needed and budgeted.\n\nThe approval covers intent to spend, not the accuracy of what gets billed later. That distinction matters because margin drift, the gap between what a vendor contract says and what the invoice actually charges, forms after the requisition is long closed.

1. What does a purchase requisition approval actually authorize?

A purchase requisition approval authorizes the intent to buy: the item or service, the estimated cost, the cost center, and the budget it draws against. It does not authorize a specific vendor rate, and it does not reference the contract terms that will later govern the invoice. It is a control on spending decisions, not on billing accuracy.

Once approved, the requisition typically converts into a purchase order with a fixed vendor and amount.

2. Where does this control sit in the procure-to-pay cycle?

Requisition approval sits at the very start of procure-to-pay, before a purchase order exists. Three-way matching follows later, comparing invoice, purchase order, and receipt. Neither step reads the underlying contract, so a requisition approved correctly today has no bearing on whether an invoice months later matches the rate card or volume tier the vendor agreed to.

That gap is exactly where a contract compliance audit is designed to look.

3. Why doesn't requisition approval catch contract violations?

Requisition approval checks budget and need at the moment of request. A contract violation, such as a stale rate applied after a tier change or a surcharge billed past its expiration, only appears on the invoice, weeks or months later. The approver reviewing the requisition has no visibility into the vendor's rate schedule at that point in the cycle.

This is a mechanism gap, not a failure of diligence by the approver.

4. How should a company close this gap?

Closing the gap requires a separate check that reads the contract itself: its rate card, volume tier, rebate clause, and not-to-exceed cap, and compares those terms line by line against what the vendor actually invoiced. Requisition approval and three-way matching stay in place; they answer different questions than a contract compliance review does.

Categories like a freight and 3PL audit or a contract labor and staffing audit apply this same line-by-line comparison to invoices those approval steps already passed.

For the wider pattern this sits inside, start with the margin drift guide.

5. Frequently Asked Questions (People Also Ask)

What is purchase requisition approval?

Purchase requisition approval is the internal sign-off step where a manager or budget owner authorizes a request to buy goods or services before a purchase order is created. It confirms the spend is needed and budgeted. It does not check what a vendor later invoices against that purchase.

Who approves a purchase requisition?

A direct manager, department head, or budget owner approves the requisition, sometimes with a second approval from procurement or finance above a dollar threshold. The approval chain is set by internal policy, not by the vendor contract governing the eventual invoice.

Does purchase requisition approval prevent overbilling?

No. It confirms the request is authorized before a purchase order exists. Overbilling happens later, at invoice time, when the vendor charges a rate, tier, or fee that does not match the contract. Requisition approval has already closed by the time that mismatch appears.

How is purchase requisition approval different from three-way matching?

Requisition approval happens before a purchase order is created. Three-way matching happens after, comparing the invoice against the purchase order and the receipt. Neither step tests the invoice against the underlying contract's rate card, tier structure, or surcharge terms.

Is purchase requisition approval part of a contract compliance audit?

No. A contract compliance audit tests invoices against contract terms after the fact. Requisition approval is a pre-purchase authorization control with a different purpose: confirming budget and need, not verifying billed amounts against contract language.

Can a fully approved requisition still lead to margin drift?

Yes. Requisition approval only confirms the purchase was authorized. It does not read the contract's rate card, volume tier, or surcharge schedule, so an invoice can drift from contract terms months later without any requisition control catching it.

What system typically enforces purchase requisition approval?

An ERP or procurement module routes the requisition to the required approvers based on dollar amount, cost center, or category before releasing a purchase order number. The system enforces the approval chain, not the contract terms the resulting invoices should follow.

1. What does a purchase requisition approval actually authorize?

A purchase requisition approval authorizes the intent to buy: the item or service, the estimated cost, the cost center, and the budget it draws against. It does not authorize a specific vendor rate, and it does not reference the contract terms that will later govern the invoice. It is a control on spending decisions, not on billing accuracy. Once approved, the requisition typically converts into a purchase order with a fixed vendor and amount.

2. Where does this control sit in the procure-to-pay cycle?

Requisition approval sits at the very start of procure-to-pay, before a purchase order exists. Three-way matching follows later, comparing invoice, purchase order, and receipt. Neither step reads the underlying contract, so a requisition approved correctly today has no bearing on whether an invoice months later matches the rate card or volume tier the vendor agreed to. That gap is exactly where a contract compliance audit is designed to look.

3. Why doesn't requisition approval catch contract violations?

Requisition approval checks budget and need at the moment of request. A contract violation, such as a stale rate applied after a tier change or a surcharge billed past its expiration, only appears on the invoice, weeks or months later. The approver reviewing the requisition has no visibility into the vendor's rate schedule at that point in the cycle. This is a mechanism gap, not a failure of diligence by the approver.

4. How should a company close this gap?

Closing the gap requires a separate check that reads the contract itself: its rate card, volume tier, rebate clause, and not-to-exceed cap, and compares those terms line by line against what the vendor actually invoiced. Requisition approval and three-way matching stay in place; they answer different questions than a contract compliance review does. Categories like a [freight and 3PL audit](/glossary/freight-and-3pl-audit) or a contract labor and staffing audit apply this same line-by-line comparison to invoices those approval steps already passed. For the wider pattern this sits inside, start with the [margin drift](/insights/margin-drift-spend-leakage-guide) guide.

Questions & Answers

What is purchase requisition approval?

Purchase requisition approval is the internal sign-off step where a manager or budget owner authorizes a request to buy goods or services before a purchase order is created. It confirms the spend is needed and budgeted. It does not check what a vendor later invoices against that purchase.

Who approves a purchase requisition?

A direct manager, department head, or budget owner approves the requisition, sometimes with a second approval from procurement or finance above a dollar threshold. The approval chain is set by internal policy, not by the vendor contract governing the eventual invoice.

Does purchase requisition approval prevent overbilling?

No. It confirms the request is authorized before a purchase order exists. Overbilling happens later, at invoice time, when the vendor charges a rate, tier, or fee that does not match the contract. Requisition approval has already closed by the time that mismatch appears.

How is purchase requisition approval different from three-way matching?

Requisition approval happens before a purchase order is created. Three-way matching happens after, comparing the invoice against the purchase order and the receipt. Neither step tests the invoice against the underlying contract's rate card, tier structure, or surcharge terms.

Is purchase requisition approval part of a contract compliance audit?

No. A contract compliance audit tests invoices against contract terms after the fact. Requisition approval is a pre-purchase authorization control with a different purpose: confirming budget and need, not verifying billed amounts against contract language.

Margin Drift Resources